What Sacramento Did For (Or is it to?) HOAs in 2017

The California Legislature was quite active this year in creating laws affecting HOAs, as six bills take effect in 2018.

SB 2

Senate Bill (SB) 2, known as the “Building Homes and Jobs Act”, was signed by the Governor on September 29 as an urgency statute, which means it took effect on the day it was signed. Its stated goal is to increase housing supply and reduce homelessness, and it creates a fund called the “Building Homes and Jobs Trust Fund. The new statutes are Government Code Section 27388.1 and Health and Safety Code Sections 50470 and 50470.5. The Fund will receive the proceeds from a new tax of $75 per document on documents recorded with County Recorders, except for documents recorded as part of a transfer of property ownership. Despite being called an urgency statute, it practically does not begin until January 1, 2018, when the County Recorders start collecting the $75 fee on recorded documents.

In the future, various documents commonly recorded by HOAs will be subject to the $75 fee, such as amendments to CC&Rs, common area alteration agreements, and liens and lien releases. Delinquent members will now face an additional $150 cost, as the cost to the HOA of recording an assessment lien and later removing the lien will be passed along to the member as part of the delinquency.

AB 534

A bill which brings some help to HOAs is Assembly Bill (“AB”) 534. Civil Code 4615 previously barred contractors from recording a mechanics lien (yes these in the future will also be subject to SB 2’s $75 fee) against an entire condominium project unless the contractor was hired by the HOA to work on common area. Contractors working on a condominium unit could only record a lien on the unit if the homeowner does not pay for the work. Civil Code 4615 will broaden to apply to the other three varieties of common interest developments – planned development, stock cooperative and community apartment projects. A new statute, Civil Code 4620, will require HOAs to notify all owners of mechanics liens filed on common area. Also, Civil Code 6658 adds the same limitations on mechanics liens to the Commercial and Industrial Common Interest Developments Act (applying to purely non-residential associations).

AB 1412

AB 1412 also makes some helpful technical changes to Civil Code Sections 4041 and 5800. Civil Code 4041, created by last year’s SB 918, is improved by allowing associations to use the last mailing address indicated by an owner, if the owner fails to respond to the annual solicitation for mailing address updates required by Civil Code 4041(c). Civil Code 5800, which provides immunity for volunteer directors in HOAs with the prescribed minimum directors and officers insurance coverage limits, previously only applied to exclusively residential associations. This left volunteer directors unprotected in the increasingly common “mixed use” associations (with residential and business units). Starting in 2018, that protection expands to also protect volunteer directors in mixed use associations. However, the immunity is expressly limited to residential tenants and owners, and commercial owners serving as directors will not be protected by Civil Code 5800.

SB 407

Senate Bill (SB) 407 adds a new Civil Code 4515, which has the expressed intent of protecting the right of HOA members and residents to “peacefully assemble and freely communicate” regarding HOA living or “for social, political or educational purposes.” The statute protects the right of members or residents to hold meetings regarding HOA issues, legislation, or public elections, and to invite public officials or candidates or homeowner organization representatives to speak in the association common area if the area is available. The statute also protects the right of members and residents to reasonably canvass or petition other members or residents and to distribute information regarding about public or HOA legal or political concerns. A member or resident using the common area for this is not to be charged a fee or deposit for use of the common area.

AB 634

Assembly Bill (AB) 634 spotlights a policy preference for solar energy by expanding Civil Code 714.1 and creating a new Section 4746. The changes make it clear that homeowners may, with reasonable limitations by the HOA, install solar systems on common area roofs over their residence or garage. Associations may require the homeowner keep the system insured, and that the owner and subsequent owners take responsibility for any damage, repair, or maintenance costs caused by the system. The most novel part of the new law is that it opens the door to solar systems on apartment-style HOA building roofs, in which condominium units are stacked so that multiple units “share” the same roof. The HOA may require the homeowner to create a “solar site survey” to show they are not taking more than their fair share of the roof.

Ultimately, this new law probably will not change much, as most multi-story HOA building roofs do not have sufficient usable area to allow a meaningful amount of solar installation per unit. The law reinforces the importance to associations of reasonable solar installation policies in architectural rules as well as the importance of common area alteration agreements before installations.

AB 690

AB 690 primarily increases required disclosures by HOA managers, by adding a new subpart “f” to Business and Professions Code 11504, expanding Civil Code 5375, and adding new Civil Code Sections 5375.5 and 5376. Per Civil Code 5375 new subparts “d” and “e,” a manager or company must, no later than 90 days after being hired, disclose in writing to the association any businesses which give the management a referral fee or other financial benefit or which are partly owned by the management. When presenting any bid or proposal for services from a vendor to the association, managers or management companies must in writing disclose any conflict of interest, whether by result of a referral fee to the management from the prospective vendor or because the manager or company owns or shares profits with the prospective vendor.

Readers: For legislation or laws online, visit the official California Legislature site, www.leginfo.legislature.ca.gov.

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.